This study will be limited in a number of ways.
a) Only questionnaire will be used as the tool to collect data. While it is a relevant method of data collection, the limitation to a single method hampers collection of all-round data.
b) The focus was only on the government or public sector. This, therefore, will limit the outcome. Employees everywhere face similar problems related to motivation.
Concentrating only on the public sector, therefore, will limit the understanding of the importance of non-financial incentives to employees.
c) Only four public departments will be used for this study. These departments will have questionnaire forms distributed for filling. Overall, only 100 questionnaire forms will be filled with each department having 25 employees answer questions. This research population as a representative of the whole Norwegian government is small hence affecting reliability of the results.
Chapter Two: Literature Review 2.1 Introduction
This chapter is a review of the literature concerning the use of non-financial incentives with the aim of motivating employees in an organization. Specifically, the chapter is a discussion using past written works about specific intrinsic elements that can be used to motivate employees working in government departments, with a bias to Norway. Also, in this section is the evaluation of a relevant theoretical framework and an empirical review of issues regarding the performance of employees in the public sector, non-financial incentives and motivation.
2.2. Theoretical Framework
There is a strong nexus between productivity of employees in organizations and non-financial incentives. According to Rahim and Daud (2012), incentives are linked to psychological effects on employees which motivates them to improve their inputs. The resultants are improved performance in the organization. The following discussion is a theoretical framework touching on the idea of non-monetary incentives, the link to employee performance and appropriate motivation theories.
2.3 Employee Performance
Employee performance is the input and output activities by an employee, and which leads to the achievement of organizational goals. It is the conduct of an employee(Shahzadi, Javed, Shahzaib Pirzada, Nasreen, & Khanam, 2014). According to Bruce, Hampel and Lamont (2011), these are expectations of an employee in how he or she executes the work-related activities in an organization. The measure of employee performance is on the achievement or organizational goals measured mostly on a monthly, quarterly, and yearly basis. Bruce, Hampel and Lamont (2011) note that it is critical for an organization to set specific expectations of every employee as a way of gauging the levels of performance. There are specific elements of organizational management that are linked to employee performance. As written by Stacks, Dodd, and Men (2011), these are;
strategic planning, team and individual development, succession planning, total compensation, and human resource technology systems. These elements are also correlated with motivation of employees to work towards achievement of the organizational objectives. For example, team and
individual development is a means of enhancing career growth of employees. As a morale booster, career growth plan for employees makes them identify themselves with the organization and hence works towards improving their work outputs.
Motivation is a key factor in employee performance. Stacks, Dodd, and Men (2011) are of the view that when an employee fails to perform as expected, it is upon the managers or the immediate supervisors to evaluate the motivational issues surrounding the working of the employees. Essentially, they must evaluate the reasons why the work activities are not performed as per the description of the organizational objectives. One of the strong motivators of employee performance, as evaluated by Latham (2016), is finances. The author writes that from expectancy theories, money is a major inducement for job performance and job satisfaction. Increments in bonus, allowances and salary motivate the employees to work more and hose results are better work outputs from employees. Latham (2016) adds that employee motivation is highly linked to rewards extended to employees from the organization. Both intrinsic and extrinsic rewards are good motivators of employees and it is upon the organizational leadership to evaluate the applicable form of motivational rewards that can be advanced to the employees.
There are a number of issues that influence employee performance and employee motivation. As noted by Baldwin Stacks, Dodd, and Men (2011), the factors include; the management style for example; authoritarian or democratic leadership styles, nature of communication practiced in the organization; for example, top-down or horizontal communication, and organizational culture, that is, the stated culture and the perceived culture among others. Successful organizations focus on motivating their employees for a number of reasons. These include; lowering the labor turnover, improving quality of products and services offered, enhancing employee loyalty, lowering employee absenteeism, and cultivating willingness to accept ideas introduced by managements for improved productivity (Shahzadi et al., 2014).
Some of effective means of enhancing employee motivation for better performance include;
making the objectives and expectations from employees clear, continually providing feedback to employees, reprimanding or correcting an employee privately when he or she deviates from the organizational course, believing in the employees including associating success to their work inputs, offering achievable rewards, and praising the employees publicly (Obiekwe, 2016).
2.4 Non-Monetary Incentives
The two categories of motivators in an organization are; extrinsic and intrinsic rewards.
The extrinsic rewards are external factors with the most important being monetary rewards. The intrinsic rewards are psychological needs that an employee requires to enhance his or her morale in working in an organization. These are the non-monetary incentives. The Business Dictionary defines non-monetary rewards or incentives as the compensation that are given in a transaction and does not involve finances. Schöttle and Gehbauer (2012) reiterate the fact that incentives system often intends to motivate the recipient, more so in the place of work. According to the authors above, previous studies have affirmed that intrinsic motivation is significantly impaired by the financial incentives, an issue that results in the lowering of the performance in an organization (Schöttle & Gehbauer, 2012). Lastly, Schöttle and Gehbauer (2012) argue that trust-based incentives and not mandatory incentives are critical in promoting intrinsic motivation and subsequent performance among individuals.
In relation to employee motivation, non-financial incentives give to a differing common meaning to meaningful work. As written by Kosfeld, Neckermann and Yang (2014), the perceived meaning of work especially be employees entails monetary rewards. Employees enter into an agreement with an employer with the utmost gain being a salary. In this regard, money is the motivator for working. However, in intrinsic rewards or non-financial incentives, this meaning is manipulated. Kosfeld, Neckermann and Yang (2014) write that several documented psychological and economic findings show that in the contemporary times, employees care less about earning or money in a job. There are other incentives that motivate workers to put more effort in an organization. For example, Sandhya and Kumar (2011) emphasize that employees in an organization may value career growth and job satisfaction more than the bonuses and monthly salaries that they receive. As a result, with the understanding of the value of intrinsic rewards, organizational leadership are balancing monetary and non-monetary incentives. In addition to good pay, especially to ward off employee labor turnover, organizational leadership are focusing on creating a relationship between the organization and the employees.
The concept of non-financial incentive is applicable in both public and private sectors. As noted by Yavuz (2004), for the public employees, it is important that non-monetary rewards are given to them since they are at the forefront of serving the public interest. Using an example of Turkey,
Yavuz (2004) notes that employees in the country are motivated using incentives such as job security, fixed wage that does not depend on their performance, and absence of a performance-based pay structure. However, from the discussion by Yavuz (2004), public employees in Turkey are not highly motivated to perform in their organizations. Their pay structure is not good and the fact that their public wage is fixed means that they may lack the drive to improve on their performance. This correlates with the argument that there is a need to balance between the two forms of incentives; that is, monetary and non-monetary rewards. Importantly, there is need to increase monetary incentives in the country and as argued by Yavuz (2004), increasing non-monetary incentives would go along recognizing specific performance by the employees and encouraging them to perform even better.
There is a strong relationship between non-financial incentives and performance. Srna and Dinc (2017) write that studies have shown that non-momentary incentives such as recognition in the organization are some of the influential rewards in an organization and which gives impetus for employees to improve on their work. Other incentives include; job security, opportunities for career growth, good relationships, and autonomy among others. The absence or presence of these incentives is critical in determining the levels of performance and the motivation to perform better for the employees. Critically, in the public sector, employees require these values for the sake of improving their motivation to serve the general public better.
2.4.1 Abraham Maslow’s Hierarchy of Needs
The Maslow’s Hierarchy of Needs and theory by Abraham Maslow is one of the recognized motivation theories. This theory was proposed by Maslow in the year 1943 in a paper titled, A Theory of Human Motivation and as written by Cherry (2018), the theory is a psychological review of people. Essentially, the theory looks at the motivation factors of human behavior. Conley (2007) in the evaluation of how companies use the Maslow’s theory to motivate their employees notes that the most valued achievement in an employee is when he or she has got self-actualization needs.
However, before this ultimate goal of employees, there are other motivation levels that the workers desire. They include; psychological needs especially the survival means; for example, food, salary, and stable employment, security needs such as work safety and benefits, belongingness such as cooperation with peers, and esteem needs in form of job titles, respect, and recognition. Figure 1
below is a representation of the Maslow’s hierarchy of needs as applicable to employees in an organization.
Important from the understanding of the Maslow’s hierarchy of needs is the motivation it gives to organizational employees and an inducement to employee performance. Shields, Brown, and Kaine (2015) write that human needs shape their motivational drive. When the needs are satisfied by the organization they work for, they reciprocate by increasing their performance. The Maslow’s hierarchy of needs theory give an assumption that people behave in a certain way depending on how their needs are satisfied. Need satisfaction produce certain feelings; for example, of pleasure.
In an organization, a need such as job security, autonomy and recognition would produce a level of satisfaction to a point that the employees reciprocate by putting more effort to achieve organizational goals. In addition, as written by McGuire (2012), the theory gives an implication of what the organizational leadership should focus on. The management should constantly review the needs of the employees in all the five levels. This is an assurance that the employees will continually be motivated, hence perpetual improvement in their performance and achievement of organizational goals.
Figure 1: Maslow’s Hierarchy of Needs (Jerome, 2013).
From the figure, the principle is that an employee has to be satisfied one level before advancing to the other. For example, the first needs are the psychological needs such as food, health, and water. In an organization, the related needs for an employee are issues such as salary and stable employment. This is before he or she desires safety needs such as job security and a favorable social structure. The ultimate goal for an employee represented at the peak in figure 1 is self-actualization. However, from the analysis of Cherry (2018), despite the influential nature of
the theory, this theory is not without criticism. For example, the theory cannot easily be tested and needs of people do not have to have a structure or following a certain hierarchy. Employees can desire self-actualization needs before psychological needs.
2.4.2 Expectancy Theory of Motivation
This theory was proposed by Victor Vroom. He proposed that motivation of employees is a result of his or her desire in the organization in form of a reward. The expectations that the employee have in the organization results in expected performance. According to Miner (2011), a reward or valence is associated with expected performance of an employee. The employees have faith that there will be some valence that will be given to them, and therefore, they are bound to put more effort. On the other hand, this theory also proposes that the employees expect that their performance will also lead to rewards. As written by Hiriyappa (2018), this theory is summarized using three forms of relationship. The first is the effort-performance relationship, where, the effort of employees is recognized in the organization. The second is the performance-reward relationship where, after a performance and recognition, employees are rewarded. The third is the rewards-personal goals relationship where, through rewards, employees achieve their rewards-personal. Rewards which are not financial; for example, participative decision-making will produce the drive to perform more in the organization.
2.5 Empirical Review
This section describes the components of intrinsic values in management that can be used to drive employee performance in public organizations. The section also describes evidence of the influence that the different non-monetary rewards have on the performance of employees in organizations. According to Jin (2013), the public sector employees often value intrinsic work motivations compared to their private sector counterparts, who view extrinsic motivations as more important. On a similar note, Giauque, Anderfuhren-Biget, and Varone (2013) emphasize the fact that private employees have less affinity or desire for intrinsic non-monetary rewards compared to their public counterparts. In two cross-sectional studies conducted among 302 employees in Norwegian organizations, intrinsic motivations impacted significantly not only on the perceived job autonomy but also on the quality of work (Dysvik & Kuvaas, 2011).
2.5.1 Non-Monetary Rewards Influence on Employee Performance
There are mixed results on empirical studies on the relationship between intrinsic motivators and organizational performance. According to Rajendran, Mosisa and Nedelea (2017), intrinsic values in an organization have impacts on the performance of employees. Rajendran, Mosisa and Nedelea (2017) investigated the impacts that intrinsic rewards have on the performance on employees in an agricultural research center in Ethiopia and found out that there is a strong correlation between the two variables. Incentives such as job satisfaction, autonomy, recognition in the organization, and job security induce the employees with morale towards improving their work results and hence achievement of organizational goals. In addition, Murpy (2015) writes that non-pay values and rewards such as participation in decision-making processes improve motivation of employees including the ability to innovate and perform more in the organization.
The author adds that this relationship is a proof that money is not a strong contributor to employee performance and does not lead to components such as improved behaviors, improved cooperation with management, and longer working period for the employees. Use of non-pay rewards is also a less costly practice in an organization and hence easier to implement.
A study conducted by Kvaløy, Nieken, and Schöttner (2015) emphasized on the role played by non-monetary incentives in enhancing the performance of employees. In the study dubbed
“Hidden benefits of reward: A field experiment on motivation and monetary incentives,” Kvaløy, Nieken, and Schöttner (2015) cite motivational talk as a critical source of motivation to the employees that actually makes a difference in their performance. Notably, motivational talk increased the output of employees by close to 20% compared to performance pay, in addition to necessitating a 40% reduction in the ratio of mistakes by the employees.
A study conducted by Giauque, Anderfuhren-Biget, and Varone (2013) demonstrated that HRM practices that promoted intrinsic work incentives were positively associated with perceived organizational performance. According to the authors mentioned above, HRM activities promoting intrinsic work incentives were instrumental in enhancing job enrichment, professional development, individual appraisal, and participation, thereby impacting positively on the performance of the organization (Giauque et al., 2013).
Many literatures of organizational behavior and human resource management have noted that non-monetary incentives are effective in motivating employees in organizations. As argued by
Abdullah and Hooi (2013), these types of incentives establish the links between organizational performance and desired behaviors of employees. Organizations that pay attention to intrinsic rewards as forms of motivations to employees are seen as caring organizations. For example, use of rewards such as recognition and appreciation of employees are seen as though they care more than those organizations that use increased salaries and bonuses for motivation. Other forms of non-monetary incentives that have a direct impact on job satisfaction include; employees’
autonomy, self-determination encouragement, and effort optimization.
The most common form of motivation used is regular review of employees’ salaries and wages. The argument of Abdullah and Hooi (2013), is that these are not effective means of motivating employees. Norway is one of the countries that have the government employees allowed to self-evaluate themselves before performance evaluation by the government institutions.
According to OECD (2008), after self-evaluation, there is a final evaluation that is conducted and anchored on dialogue as opposed to using control tools.
On the other hand, Giauque, Anderfuhren-Biget, and Varone (2013) explain that there is inadequate and insufficient empirical evidence to support the assumption that public sector motivation (PSM) has a direct and meaningful impact on the performance of public employees.
According to Giauque, Anderfuhren-Biget, and Varone (2013), the performance of public employees hinges not only on the PSM but also on multiple other factors, including organizational commitment, job satisfaction, and organizational citizenship behaviour.
2.5.2 Autonomy and Performance
One of the components of non-monetary incentives that is used in organizations to motivate employees is autonomy. Chirkov, Ryan and Sheldon (2011) define employee autonomy as the ability for the workers in an organization to control their situations in the workplace. In any business, it is important to let employees control their input in the organization. It can have positive impacts not only for the organization but also for the individual employees. It is a form of motivation. Chirkov, Ryan and Sheldon (2011) write about an autonomous economy and note that autonomy for the employees is related to self-determination and ability to make decisions on their own. Self-determined individuals are motivated more than employees who work under tight controls. When correlated as a form of intrinsic reward in an organization, giving employees
autonomy brings out liveliness in working. In essence, without autonomous working makes the environment in the organization stale or is not motivating.
Related to autonomous employees is learning. According to Rajagopal (2019), in the past,
Related to autonomous employees is learning. According to Rajagopal (2019), in the past,